A Big N.B.A. Franchise Gets A Small Business Loan, Only To Return It

When the Small Business Administration rolled out its Paycheck Protection Program, the language surrounding it was not likely to have conjured up visions of “Showtime” or major professional sports franchises.

Yet the Los Angeles Lakers, who are worth north of an estimated $4 billion, had their application approved and the organization received a $4.6 million loan under the program.

Today, they have handed the money right back.

The move came as the Small Business Administration and the federal government have faced criticism over funds being appropriated for formidably sized businesses such as asset management firms and chains of restaurants and hotels—including 200 public companies still holding onto their loans—as the $349 billion initial allocation ran dry within two weeks. Many prospective applicants were left empty-handed, including some smaller competitors in the same industries.

The Action Network’s Darren Rovell said on Twitter that he confirmed that “the Los Angeles Lakers were the only N.B.A. team to ask for a Paycheck Protection Plan loan from the Small Business Administration”, though Forbes has been working to confirm that information up until the time of this article’s publication.

The Lakers are among the most valuable franchises in the N.B.A. and pro sports over all, with only the New York Knicks and Golden State Warriors eclipsing the estimated $4 billion mark among N.B.A. franchises. The $4.6 million sum was roughly half of the N.B.A.’s mid-level exception, designed to help salary cap-strapped teams pursue talent in free agency, and less than the roughly $7.7 million average annual salary for an N.B.A. player.

“The Lakers qualified for and received a loan under the Payroll Protection Program. However, once we found out the funds from the program had been depleted, we repaid the loan so that financial support would be directed to those most in need,” the team said in a statement. “The Lakers remain completely committed to supporting both our employees and our community.”

The Lakers and their fellow Staples Center occupants, the Los Angeles Clippers and Los Angeles Kings, were reportedly among the franchises who took a comprehensive approach to supporting employees during the COVID-19 shutdown, including third-party staffers who work at the arena.

A second round of loans totaling more than $300 billion has been made available, although technical issues complicated use of the portal for prospective applicants over the weekend. Jovita Carranza, the administrator of the Small Business Administration, has said that some $2 billion in declined or returned funds will be made available in this second round of applications and loans.

The notion behind the program is to provide loans to businesses to help quell the torrent of layoffs, furloughs and other payroll interruptions during the COVID-19 shutdown, with potential for loan forgiveness if workers are retained or re-hired.

The Small Business Administration admonished some prospective applicants, stating that the program was not intended for businesses with access to capital markets and liquidity. That sentiment was echoed in a statement from the Treasury Secretary Steve Mnuchin, which warned of “severe consequences” for larger businesses that qualify for Paycheck Protection Program loans by exploiting loopholes in the program.

“There are severe consequences for people who don’t attest properly to this certification. And again, we want to make sure this money is available to small businesses that need it, people who have invested their entire life savings,” Mnuchin said. “We appreciate what’s going on, and they’re hiring people back.”